James Massola and Jonathan Swan

Prime Minister Tony Abbott has dismissed the proposal of a grand compact between business, unions and government to end the fractious debate over industrial relations in Australia.

But Mr Abbott seized on apparent divisions between Labor leader Bill Shorten and Australian Workers Union boss Paul Howes on how to tackle union corruption, a day after the union leader lashed “criminal” elements in the movement and called for the workplace debate to be reset.

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But on Thursday the prime minister said he while he was on a unity ticket with Mr Howes and "against Bill Shorten" on the push to tackle union corruption, particularly following "credible allegations from former union officials about organised crime" published by Fairfax Media, he was not sure about a 1980s-style price and wages Accord, describing the idea as “very 1980s”.

“I certainly think workers and managers need to be partners in the enterprise. Whether we need to have some kind of grand compact between big government, big business and big unions, I'm not so sure about that," he told Fairfax radio station 4BC.

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“I think wages should be as high as a business can afford, if the business is profitable innovative and competitive, then it can afford higher wages but if its not profitable, then its going to have trouble paying the wages it is paying.”

Mr Abbott said Mr Howes had “pulled the rug out from underneath Bill Shorten's scare campaign” that the Coalition government would cut wages and seek to reduce penalty rates.